The penny has no official replacement yet
There is no confirmed plan to remove the penny from circulation, and no replacement coin has been designated. The U.S. Mint still produces pennies, and they remain legal tender. However, several proposals have circulated in Congress over the past two decades to stop penny production, and if that happened, the most likely scenario would be rounding cash transactions to the nearest nickel.
The debate centers on cost: the Mint spends more than one cent to produce each penny, making them expensive to manufacture and distribute. Retailers and banks also spend money handling, counting, and storing pennies. Despite these costs, no legislation has passed to eliminate the penny, partly because of nostalgia and the phrase "a penny saved is a penny earned."
Key Takeaways
- The penny remains in production and legal tender with no official replacement designated by the U.S. government.
- If the penny were phased out, cash transactions would likely round to the nearest nickel, not shift to a new coin.
- Canada phased out its penny in 2013 and uses rounding for cash purchases, providing a real-world model for how this could work.
- Digital payments and credit cards mean fewer people use cash for small transactions, reducing the practical impact of penny elimination.
- Proposals to end penny production have appeared in Congress multiple times but have not become law.
How rounding would work if the penny disappeared
If the U.S. stopped producing pennies, the most practical solution would be rounding to the nearest five cents for cash transactions only. Prices would not change—a item would still cost $1.99—but when you pay with cash, the total would round up or down to the nearest nickel. A bill of $5.97 would round to $6.00; a bill of $5.93 would round to $5.95.
Credit card and digital transactions would not round. Only cash purchases would be affected. This is exactly what Canada did when it stopped producing the penny in February 2013. Retailers there round cash totals, but debit and credit card charges stay exact. Canadians who use cards for most purchases barely noticed the change.
Studies of Canada's experience show that rounding does not significantly harm consumers or retailers over time. Some transactions round up, others round down, and the effects balance out across a year of shopping. Retailers are required to post rounding rules clearly so customers know what to expect.
Why the penny costs more to make than it's worth
The U.S. Mint has reported that producing a single penny costs between 1.5 and 2.5 cents, depending on the year and metal prices. This means the government loses money on every penny made. The nickel costs about 4 cents to produce, so it is also unprofitable, but the nickel is used more frequently in transactions and is less likely to be lost or discarded.
Beyond manufacturing, there are hidden costs. Banks pay armored car services to transport coins. Retailers hire employees to count and roll coins. Vending machines break down from penny jams. Charities spend volunteer hours sorting penny donations. These costs add up across the entire economy, though no single organization bears them all.
The penny's low value also means people often abandon them. Surveys show that many Americans throw pennies away rather than spend them, treating them as worthless. This waste—both in production and in disposal—is part of the argument for elimination.
Congressional proposals to eliminate the penny
The most recent serious proposal was the Dollar Coin Act of 2021, which would have phased out the penny and dollar bill while promoting dollar coins. It did not pass. Earlier, the Coins for America Act (2006) and the Penny Elimination Act (2006) both proposed ending penny production. None of these bills became law.
Opponents of penny elimination include the zinc industry, which supplies the metal for penny blanks, and some consumer groups who worry about rounding disadvantaging low-income shoppers. Supporters include the Mint itself, which has testified to Congress about the cost burden, and business groups tired of handling small change.
The political reality is that the penny has cultural weight. Many Americans see it as part of American tradition, and Congress has been reluctant to eliminate it without overwhelming public support. No recent proposal has gained enough momentum to move forward.
How other countries handle the smallest coin
Canada eliminated its penny in 2013 and has not looked back. The country now rounds cash transactions to the nearest five cents (the nickel equivalent). Australia phased out its one-cent and two-cent coins in 1992 and rounds to the nearest five cents. New Zealand stopped producing its one-cent and two-cent coins in 1989 and rounds to the nearest five cents.
The European Union removed the one-cent and two-cent coins from most countries' circulation in 2019, though they remain legal tender. Sweden has largely eliminated cash and rounds digitally. The United Kingdom stopped producing the half-penny in 1969 without major disruption.
In every case, the transition was smoother than expected. Retailers adapted quickly, consumers adjusted their habits, and the economy did not suffer. These examples show that eliminating low-value coins is feasible and does not cause the problems some people fear.
What would happen to pennies already in circulation
If the penny were phased out, existing pennies would not disappear overnight. They would remain legal tender indefinitely, just like the Susan B. Anthony dollar or the Eisenhower dollar. People could still spend them at banks or stores, but new pennies would not be minted.
Over time, pennies would gradually leave circulation as people lose them, save them, or donate them to charity. This happened naturally in Canada—pennies are still legal tender there, but you rarely see them in stores because people hoarded them or threw them away. The transition took several years, not months.
The U.S. Mint would likely announce a phase-out date well in advance, giving banks and retailers time to prepare. Coins in bank vaults would be returned to the Mint for recycling. The zinc and copper would be reused in new coins or sold as scrap metal.
Why digital payments make the penny less relevant
The practical importance of the penny has declined sharply as digital payments have grown. In 2023, credit cards, debit cards, and mobile payment apps account for the majority of consumer transactions in the United States. Younger people especially rarely use cash for small purchases.
When most transactions are digital, the penny's existence matters less. A person who buys coffee with a card, pays for groceries with a phone app, and uses a subscription service for entertainment may handle physical pennies only a few times a year. For these people, penny elimination would have almost no impact.
This shift in payment behavior is one reason why penny elimination has not become urgent. The economic cost of the penny is real, but it affects fewer transactions each year. If cash use continues to decline, the pressure to eliminate the penny may fade entirely, or it may finally become politically feasible because fewer people would be inconvenienced.
Frequently Asked Questions
Would rounding hurt people who pay with cash?
Rounding affects only cash transactions and only by a few cents per purchase. Over time, some transactions round up and others round down, so the effects balance out. Canada's experience shows that low-income shoppers—who use cash more often—were not significantly harmed. Retailers are required to post rounding rules clearly.
What happens to my penny collection if the penny is eliminated?
Pennies remain legal tender indefinitely after production stops, so you can spend or trade them at any bank. Rare or valuable pennies (older dates, mint marks, or error coins) retain their collector value. The U.S. Mint would not force anyone to surrender pennies.
Could the penny be replaced with a different coin instead of rounding?
Theoretically, yes, but rounding is more practical and less expensive. Creating a new coin costs money to design, mint, and distribute. Rounding requires only a change in retail practices. Every country that has eliminated a low-value coin has chosen rounding rather than replacement.
Why does the penny cost more to make than it's worth?
The metals used (zinc and copper) and the machinery to stamp, inspect, and package coins cost more than one cent per coin. The Mint's costs have risen as metal prices fluctuate. The nickel also costs more to produce than its face value, but it is used more often, making it economically more defensible.
Is there any chance the penny will be eliminated soon?
No recent legislation has advanced toward elimination. While the Mint has acknowledged the cost burden, Congress has not prioritized penny elimination. The shift to digital payments may eventually make the issue moot, or it may eventually make elimination politically easier because fewer people would be affected.